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1.   Introduction

1.1    This is a technical paper produced by officials in the Department of the Environment, Transport and the Regions (DETR) as an accompaniment to the Draft Climate Change Programme published on 9 March 2000. The purpose of the paper is to provide further details of the derivation of the carbon savings figures included in the Draft Climate Change Programme, and listed in Section II, Chapter 9 of that document. For ease of reference, the table summarising the measures in the Programme is appended to this paper. The table lists the carbon savings expected to accrue from each measure in 2010.

1.2    These carbon savings figures have been calculated by a number of different Government Departments, using a variety of different models and techniques. This note sets out:

• where the numbers have come from;
• what models have been used;
• what are the key assumptions and uncertainties; and
• where further information may be obtained.

1.3    The carbon savings figures are explained in section 2 of this paper, according to the sector in which they are achieved. Further information on the policies and measures delivering these savings is to be found in the main Programme. And a qualitative assessment of the costs and benefits associated with the Programme as a whole can be found in the Draft Regulatory Impact Assessment (RIA) which also accompanies the Programme. Details of the costs and benefits associated with specific measures will be found in the individual RIAs for each measure.

2.   The calculation of the carbon saving figures

Business

• Climate change levy agreements with energy intensive sectors / Implementation of Integrated Pollution Prevention and Control (IPPC) directive - 2.5MtC

Derivation of figure

2.1    Negotiations with energy intensive industries have resulted in those industries signing up to challenging targets to improve energy efficiency and reduce carbon dioxide emissions over the next decade. In return, these industries will be eligible for a reduced rate of Climate Change Levy.

2.2    The negotiations have been based around estimates of "all cost effective" energy efficiency investment, which have been developed by ETSU for the DETR. For the sectors involved, ETSU estimate that "all cost effective" investment should result in carbon savings of around 4 MtC in 2010. But this estimate fails to take into account issues like constraints on management time, and limited capital availability. These have been factored into the negotiations, with the result that actual savings are expected to be about 2.5 MtC. This figure is based on the targets which underlie Memoranda of Understanding signed in December. As such, the figure is subject to revision until Agreements are actually signed.

Sources of further information:

- ETSU report for Global Atmosphere division of the DETR, 'Industrial Sector Carbon Dioxide Emissions: Projections and Indicators for the UK, 1990-2020 - Seventh Annual report', April 1999.

- A Press Notice describing December Memoranda of Understanding is available at: www.press.dtlr.gov.uk/9912/1235.htm

• Energy efficiency measures under the climate change levy package - 0.5MtC

Derivation of figure

2.3    This carbon saving is derived from the effects of two separate measures, both of which were announced in the Pre-Budget Report. These are a system of 100 per cent enhanced capital allowances (ECAs) for energy saving investments; and a £50m energy efficiency fund which will be aimed at stimulating carbon savings in the business sector.

2.4    Businesses benefit by using the ECAs to delay their payments of corporation tax. The full list of carbon reduction / energy efficiency measures on which the ECAs can be claimed is still being developed (although a number of technologies have already been identified). However, the average annual level of qualifying investment over the coming decade, the Qualifying Expenditure (QE), is estimated to be in the region of £1000M/y.

2.5    The exact cost to the Exchequer of the enhanced capital allowances scheme will depend on take-up, but it is estimated to cost approximately £100m in 2001-02. The cost thereafter will depend on the evolution of the list in terms of which additional technologies could be brought within its scope. In order to avoid double counting, the estimated savings from this measure exclude the savings from the take up of enhanced capital allowances in the negotiated agreement sector.

2.6    Details of how the £50M/y fund will be spent are still under discussion but the savings are likely to be similar to those from the ECAs. The overall total impact of this business programme is subject to large uncertainties, but is likely to centre around 0.5 MtC/y by 2010.

Sources of further information:

- A recent consultation paper on 'Energy Efficiency Measures under the Climate Change Levy Package' can be found at: www.defra.gov.uk/environment/consult/eeccl/index.htm

• Voluntary reduction targets through first stage of an emissions trading scheme - 0.5 to 2MtC

Derivation of figure

2.7    The primary aim of emissions trading is to enable emissions reductions to be achieved more cost-effectively. Trading allows this to happen because companies who would have found it very expensive to meet their emissions reductions targets can instead buy from those who find it relatively cheap to go beyond their targets. But the early introduction of a domestic trading scheme could also result in additional emissions reductions being achieved. This will occur if some companies currently without targets join an emissions-trading scheme and agree emission reduction targets that go beyond the savings they were going to make under a 'business as usual' scenario.

2.8    The number of companies entering into a domestic trading scheme, and the level of emissions reductions they might achieve, are of course subject to considerable uncertainty. But preliminary analysis has focused on identifying which sectors of the economy are most likely to enter into a trading scheme - based in large part on the levels of interest revealed by participation in the ACBE / CBI process. The most likely sources of extra carbon savings from an emissions trading scheme are:

• Companies whose activities are partly covered by CCL Agreements, and who will want to be able to make carbon savings from other elements of their activities.

• Companies from the oil, gas and power sectors, who have been leading proponents of emissions trading, but who are not currently covered by CCL Agreements.

• Some other companies from the business sector (particularly industry), who are not eligible for entry into CCL Agreements, but for whom energy costs are important.

• Projects taking place elsewhere in business, and in the domestic and transport sectors, which would not otherwise take place, and which can receive credit in a trading scheme.

2.9 Using data on emissions in each of these sectors(1), and taking a relatively conservative view of the levels of emissions reductions likely to be achieved, it is estimated that a domestic trading scheme could deliver in the range of 0.5-2 MtC extra savings in 2010. The range is so wide because the level of entry into the scheme will depend very much on the detail of its design.

Sources of further information:

- Further details on the design of a carbon emissions trading scheme can be obtained from the "UK Emissions Trading Group" Secretariat on 020 7245 8035.

Business and Domestic

• Reform of building regulations (England and Wales only) - at least 0.25MtC

Derivation of figure

2.10    The carbon saving is derived from an estimate of the impact of the proposed amendments to Part L to the Building Regulations. It has been assumed that the amendments would start to come into effect in 2002 and come fully into effect in 2004. The National Home Energy Rating (NHER) Evaluator v3.4 domestic energy model was used to assess the impact of the proposed amendments in a number of key dwelling types. The national figure was calculated on the basis of the proportion of these dwelling types built in 1997 and 1998 (data obtained from National Home Building Council (NHBC) quarterly statistics bulletin) and the average annual rate of construction of new dwellings in England & Wales from 1989 to 1998 (data obtained from DETR Housing & Construction Statistics).

2.11    The NHER Evaluator model is produced by National Energy Services Ltd. and uses an annual calculation method to produce a robust estimate of a dwelling's energy use and potential energy savings, given relevant information about the dwelling characteristics and the behaviour of the occupants. As its basis the model uses BREDEM-12 (see reference below). The NHER Evaluator model also produces an output which conforms to the Standard Assessment Procedure (SAP) for energy rating schemes for dwellings in the UK (see reference below).

Sources of further information:

- BREDEM-12 Model Description. B R Anderson, P F Chapman, N G Cutland, C M Dickson and L D Shorrock. Building Research Establishment Report. BR 315. 1996.

- The Government's Standard Assessment Procedure for Energy Rating of Dwellings. 1998 edition. BRECSU, BRE. 1998.

- The Government's consultation papers on its proposals to amend the Building Regulations are due to be published around April 2000 and will be announced by a News Release. When published they will be accessible at www.construction.detr.gov.uk/br.htm

Transport

• Voluntary agreements on CO2 from cars and impact of changes to company car taxation and vehicle excise duty - 4MtC

Derivation of figure

2.12    The figure of 4MtC represents the estimated carbon savings from the voluntary agreements with car manufacturers, the reforms to company car tax and to vehicle excise duty. The figure has been derived by incorporating the voluntary agreement's impact on energy efficiency into the DETR's national road traffic forecast (NRTF) model, supplemented by the Vehicle Market Model (VMM). The NRTF / VMM framework produces a projection for road traffic growth and the associated percentage reduction in carbon dioxide emissions in 2010 (relative to their level in 1990) resulting from the voluntary agreement. This percentage reduction in the level of carbon dioxide has been applied to the DTI's latest Working Paper carbon dioxide projections from transport for 2010 to produce a carbon savings figure.

Sources of further information:

- A description of the NRTF model can be found on the DETR's web-site at: www.dtlr.gov.uk/roads/roadnetwork/nrpd/heta2/nrtf97/index.htm

- At the present time there is no published information relating to the VMM. Briefly, the VMM is a national vehicle fuel consumption model. It estimates the effects of different policy levers, such as changes in fuel prices, on the fuel consumption of the vehicle fleet. It is also possible to estimate the impact of changes in technology on fuel efficiency.

• Low intensity implementation of the Integrated Transport White Paper (ITWP) measures (England only) - 0.6MtC

• Additional savings if there is high intensity implementation of the ITWP measures by local authorities (England only) - 2.4MtC

• Additional savings if there is high intensity implementation of the ITWP measures in other areas, e.g. rail investment (England only) - 0.3MtC

Derivation of figure

2.13    These figures were produced using the DETR's national road traffic forecasts (NRTF) and vehicle market models (VMM). They are based on the "Tackling Congestion and Pollution" scenarios that were included in "The Government's first report under the Road Traffic Reduction (National Targets) Act 1988". The carbon savings estimated under each of the scenarios are additional to those estimated for the voluntary agreement on CO2 from cars.

Sources of further information:

- "The government's first report under the Road Traffic Reduction (National Targets) Act 1988" appears on the DETR's web-site at: www.roads.dtlr.gov.uk/roadnetwork/rtra98/report1/pdf/report1.pdf

Domestic

• Domestic energy efficiency (including impact of new EESOPs) - 2.7-3.8MtC

Derivation of figure

2.14    This carbon saving represents the total potential saving from domestic energy efficiency, and includes the effect of the new energy efficiency standards of performance (EESOPs) obligations. These obligations will be set by ministers via the Regulator to meet energy (set in GWh) saving targets, and will apply to all gas and electricity suppliers with a minimum number of 50,000 customers. The cost to the companies of meeting the EESOP obligation is not specified. This is treated as a business cost and may be passed on to their customers.

2.15    EESOP4 will be a 3 year programme starting in April 2002. This will follow the 2 year EESOP3 (April 2000-March 2002) which is set by the Regulator and for which a charge of £1.20/year per customer has been agreed. Based on an illustrative set of possible measures, the Government estimates that the prospective company cost of attaining the proposed EESOP 4 target - if passed on in full to consumers in higher prices - would represent 90p per quarter on each fuel, averaged over the 3 years of EESOP 4.

2.16    Carbon savings have been calculated for individual measures (eg Cavity Wall Insulation, Condensing Boilers, Compact Fluorescent Lamps) then summed. For each measure, these depend on:

• The "total improvement" per household, (ie the energy savings assuming no comfort taking by occupants) (data provided by BRE - see 'Sources of further information');

• The "slippage" to comfort - which varies: (1) between disadvantaged households (ie on income or health related benefits) and others; (2) between measures (most for fabric insulation, less for condensing boilers and heating controls and none for electrical appliances such as fridges or washing machines); (3) over time, since as incomes rise householders can afford to use as much fuel as they need and therefore have less need to take part of any improvement in energy efficiency as comfort.; and

• The number of additional installations beyond Business as Usual - there is very little data on likely responses to schemes on this scale. For each measure, plausible maximum and minimum values have been estimated for the share of the remaining 2010 potential (beyond BAU) which might be captured, taking account of the likely net payback to householders, and of diminishing returns when market penetration becomes high. For cavity wall insulation and condensing boilers, constraints on the rate of expansion of current markets are built in.

Sources of further information:

- The EESOP4 Consultation Document can be found at: www.defra.gov.uk/environment/conindex.htm

- BRE report for Global Atmosphere division of DETR - "The scope for cost-effective energy savings and carbon emissions reductions for the housing stock - 1998 update", published September 1998, ref CR350/98, by Hay and Shorrock.

• Action to encourage replacement of community heating systems - 0.9MtC

Derivation of figure

2.17    This figure reflects the potential, identified in a 1998 Nationwide Survey of Community Heating, to upgrade a proportion of existing community heating schemes. The figure for carbon savings is based on estimates provided by ETSU, in consultation with BRECSU, given the level of accuracy possible at this stage of the bidding process.

Sources of further information:

- DETR (1998) 'Nationwide Survey of Community Heating', (Final Report), BRECSU, March 1998

• New Home Energy Efficiency Scheme (HEES) - 0.2MtC

Derivation of figure

2.18    This figure is derived from an estimate of the impact of the New HEES energy efficiency packages on fuel poor households. It uses the BREDEM-12 model to assess the impact of the measures and data from BRE's BREHOMES model to estimate the likely take up of the individual measures across the housing stock.

2.19    BREDEM-12 is an extensively tested model that uses an annual calculation method to produce a robust estimate of a dwelling's energy use and potential energy savings, given relevant information about the dwelling characteristics and the behaviour of the occupants (1). It provides the basis for all energy rating schemes for dwellings in the UK and, in the form of the Standard Assessment Procedure (2), and is used within Building Regulations as a means of demonstrating compliance.

2.20    BREHOMES is a model of the energy use of the entire housing stock that uses BREDEM to calculate the energy use of individual categories of household, defined by tenure, dwelling type, dwelling age and the ownership of central heating (3). BREHOMES provides a unique database of information on the trends in energy use and energy efficiency of the housing stock spanning almost three decades. The key information is presented in the Domestic Energy Fact File (4), which documents these trends and indicates the potential for further take up of individual measures across the whole stock.

Sources of further information:

BREDEM-12 Model Description. B R Anderson, P F Chapman, N G Cutland, C M Dickson and L D Shorrock. Building Research Establishment Report. BR 315. 1996.

The Government's Standard Assessment Procedure for Energy Rating of Dwellings. 1998 edition. BRECSU, BRE. 1998.

The Physically-based Model BREHOMES and its Use in Deriving Scenarios for the Energy Use and Carbon Dioxide Emissions of the UK Housing Stock. L D Shorrock and J E Dunster. Energy Policy. Vol 25, No. 12. 1997.

Domestic Energy Fact File 1998. L D Shorrock and G A Walters. BRE Report BR 354. 1998.

• Appliance standards and labelling - 0.2 to 0.4MtC

Derivation of figure

2.21    This figure has been produced with reference to the published current baselines and policy scenarios that are produced by the Market Transformation Programme. These are the result of an extensive bottom-up consultation process with business and experts - and which inform discussion, prioritisation and development, especially of low-cost measures and generic product policy options such as labels, minimum standards and voluntary agreements.

Sources of further information:

- To find out more about the Market Transformation Programme and the scenarios that it has produced, visit its web-site at: www.mtprog.com

Agriculture, Forestry and Land Use Change

• Afforestation - 0.6MtC

Derivation of figure

2.22    The projected carbon saving for expansion in UK forest area between 1990 and 2010 was obtained using the dynamic model CFLOW that allows estimation of rates of uptake by carbon of trees at different stages of growth.

2.23    The model performs separate calculations for conifers and broadleaves, areas of which are assumed to expand at 7 kha and 10 kha per year respectively in line with recent planting rates. It allows for carbon storage in woody biomass, soils and litter. There are no associated timber products before 2010.

Sources of further information:

- R Milne, T Brown, T Murray, 1998: The effect of geographical variation of planting rate on the uptake of carbon by new forests of Great Britain Forestry vol 71 pp 297-309

- R Dewar, M Cannell, 1992: Carbon sequestration in the trees, products and soils of forest plantations; an analysis using UK examples. Tree Physiology vol 11 pp 49 72

Public Sector

• New central Government, schools and NHS target - 0.5MtC

Derivation of figure

2.24    Apart from the plans and targets for central Government, detailed programmes for the public sector are still under development. Until they are finalised, savings estimates have been based on a similar share of the "All Cost-Effective" (ACE) potential to that in the business sector overall, i.e. just under 50%.

2.25    In terms of how energy is used (e.g. primarily building services plus IT, a few large estates, large numbers of small users), the public sector is much more like the commercial sector than industry, so the share of ACE might be similarly rather lower than 50%. However, since the public sector is expected to set an example, it is likely that the outcome will be higher than for the commercial sector, but not as high as for heavy industry.

Sources of further information:

Not applicable.

(1) Data taken from latest DTI Working Paper on emissions projections.
Back to paragraph 2.9

Appendix: Summary of the UK's draft climate change programme

Sector	Measure	Comment	Saving (MtC)
Business	Climate change levy, including exemption for CHP and renewables	In projections
Transport	Fuel duty escalator to 1999	In projections
Energy Supply	10% Renewables	In projections
Business	Climate change levy agreements with energy intensive sectors/Implementation of IPPC	Carbon savings from first wave of agreements with energy intensive sectors. Negotiations on other sectors in progress	2.5
Business	Energy efficiency measures under the climate change levy package	Actual savings will depend on final design and take-up Savings additional to price effect of the climate change levy and exemptions included in the baseline projections	0.5
Business	Voluntary reduction targets through first stage of an emissions trading scheme	Depends on sectors brought into the scheme	0.5-2
Business and Domestic	Reform of building regulations (England and Wales only)	Review in progress	at least 0.25
Transport	Voluntary agreements on CO2 from cars and impact of changes to company car taxation and vehicle excise duty	Details of changes to company car taxation still under discussion, but unlikely to change total carbon savings significantly	4
Transport	Low intensity implementation of integrated transport white paper (ITWP) measures (England only)	Illustrative scenario.  Transport Bill contains powers for a number of measures in the ITWP.	0.6
Transport	Additional savings if there is high intensity implementation of ITWP measures by local authorities (England only)	As above	2.4
Transport	Additional savings if there is high intensity implementation of ITWP measures in other areas, eg. rail investment (England only)	As above	Up to 0.3
Domestic	Domestic energy efficiency (including impact of new EESOP)	Scope for savings from cost effective energy efficiency measures	2.7-3.8
Domestic	Action to encourage replacement of community heating systems	Identified potential	0.9
Domestic	New HEES	Programme announced	0.2
Domestic	Appliance standards and labelling	New labels introduced since 1995	0.2-0.4
Agriculture, Forestry and Land Use change	Afforestation	Continuation of current rate of growth	0.6
Public sector	New central Government, schools and NHS targets	Programme to be agreed	0.5
Total reduction (MtC)			17.6
Total % reduction in greenhouse gas emissions			21.5%
Total % reduction in CO2 emissions			17.5%
Examples of additional action not quantified at this stage	- action by devolved administrations  - housing expenditure by local authorities  - improved management of traffic speed  - action by local authorities  - voluntary carbon offset initiatives - public awareness campaigns		Additional carbon savings

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Published 9 March 2000

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